Before I say anything substantive about Economania, the European Central Bank’s online monetary-policy game, I’d like us all to take a moment and simply look at the picture that the game begins with:
More substantively, the game inadvertently says a lot about how the ECB understands its job. While you’re playing, it tracks production growth, the money supply, inflation, and unemployment. But when you finish, you’re judged on only one thing: the inflation rate.
To be fair, the European Central Bank is not the Federal Reserve. The Fed has a dual mandate (though some conservatives want to change that.) It’s charged with keeping inflation low and employment high. The ECB has a single mandate: Keep inflation low. This can lead to some odd outcomes, as Matt Yglesias found out when he took it the virtual central bank for a spin:
They grade you on the basis of a pure inflation targeting regime asymmetrically centered at 2 percent. I played a round in which inflation averaged -0.25% and we had a continent-wide depression in which output fell for twelve straight quarters. They gave me 2 stars out of four. I also ran a game in which inflation average 4.16% and we had zero quarters of recession. They gave me zero stars even though in the higher inflation scenario I was closer to the 2% target!
Oops. And it’s not much better in real life. Europe’s central bankers are still obsessing over the abstract costs of future inflation rather than the devastating price of the continent’s ongoing, slow-motion collapse.
At an rate, head here to try your hand at being a four-star, incredibly myopic central banker.
Related: Is it legal for the ECB to save Europe?